Bottom 25% herds close costs gap

Published 5 April 17

The gap in total costs between the top and bottom 25% herds closed by a third in the last three years, according to the latest Dairy Evidence Report. Although both the top and bottom quartiles reduced costs, in fact, all quartiles have lowered costs year-on-year. In 2016, costs were diluted by 0.5-0.9ppl due to cow milk yields increasing, on average, by 2% year-on-year. The remaining cost reduction mainly occurred through lower input quantities and/or lower prices. Some specific areas of spending that noticeably reduced, included: feed, fertiliser, building repairs and capital/annual investment spending.

However, in spite of the reducing gap in costs of production, the wider difference in revenue between the top and bottom quartiles meant the gap in net margin did not change. The challenge for the bottom quartile herds is how to at least maintain or better still, continue the journey of lowering costs while improving technical performance, even when milk prices increase.

If Britain is to increase further its competitive advantage in Western Europe, then this journey is an important one. Especially in a post-Brexit world, whereby GB could be even more exposed to global market forces.